All posts tagged Roger Carr

The U.K.’s Takeover Panel deftly managed to dodge becoming a political football this week.

A panel report called for a pragmatic tweak to the code on mergers and acquisitions, not the radical overhaul some emotional politicians were calling for after Kraft’s £11.9 billion takeover of beloved British chocolate-maker Cadbury earlier this year.

The panel plans to tighten the so-called “Put up or Shut up” rules–effectively forcing potential bidders to clarify their intentions towards a target or walk away within a shorter period. It will also require that bidders’ identities be revealed, ending the tendency for bidders to stalk targets in the shadows. Both recommendations are seen as sensible by most M&A practitioners.

What the panel rightly didn’t do was to bow to political pressure to change the code in response to political pressure driven by muddled goals.

Assuming the combined entity manages to hit its low-end annual synergies target of “at least $675 million,” the net present value of projected synergies, assuming a 30% tax rate and cost of capital of 10%, would equate to around £2.9 billion, which is less than the premium being paid.

Just before a Kraft bid was first mooted in September, Cadbury’s price was 568p. The first offer was pitched at around 720p, representing a 27% premium. As we noted back in November, Cadbury has historically grown pro-forma Ebidta by around 10% a year, so – keeping the EV/Ebitda multiple constant – the initial bid represented less than three years’ historic long-term growth on the market’s pre-bid price.

To be sure, Cadbury’s business mix has changed over the years, which means it could now represent a stronger growth profile…

Kraft and Cadbury are now friends, we’re told. But are they really? Frenemies might be more like it.

After more than four months of spirited verbal jousting, during which Cadbury’s brass disparaged everything from Kraft’s products to its management, the two sides have come together to turn a hostile deal “friendly.”

Cadbury’s board unanimously voted to recommend the deal to the company’s shareholders. But it seems to be a lukewarm recommendation, at best.